Why Wolfspeed Plunged This Week

Source The Motley Fool

Shares of Wolfspeed (NYSE: WOLF) plunged 37.6% this week through Thursday trading, according to data from S&P Global Market Intelligence.

The rout in the stock largely came on Thursday, following Wednesday evening's earnings release for the company's fiscal first quarter, which missed expectations.

Wolfspeed had made some positive funding announcements in recent days, but the fruits of its massive debt-fueled buildout haven't shown up yet.

Massive spending, yet revenue declines

In the September quarter, Wolfspeed's revenue declined slightly to $194.7 million, missing expectations, while its non-GAAP (adjusted) earnings per share plunged to negative $0.91, well below the $0.09 forecast. The massive loss was due to a number of restructuring charges the company announced, including severance payments and an early facility closure made in an effort to cut costs and right-size its cost base for a weaker-than-expected near-term revenue outlook.

Of note, auto and industrial markets are in a down-cycle at the moment, which is an inopportune time for Wolfspeed and the massive investments it's making in silicon carbide chip manufacturing. For the fiscal second quarter ending in September, management forecasts between $160 million and $200 million in revenue, a sequential decline and well below analysts' estimates of $214.6 million.

Wolfspeed may get CHIPS money, but it has to have a sustainable business model

After an 80% plunge this year, Wolfspeed surged recently after announcing it had signed a non-binding memorandum for $750 million with the CHIPS Act department and another $750 million in funding from a consortium of big-name private equity funds and hedge funds.

However, the dismal earnings report has undone that dead cat bounce for now. If Wolfspeed's massive investments don't start to yield results, the company's liquidity could be called into question. In fact, on the conference call, management noted it would have to raise up to $300 million in equity, diluting shareholders, in order to receive the CHIPS funding.

While the company has $1.69 billion in cash and the other $1.5 billion in total outside funding options, Wolfspeed also already has over $6.1 billion in debt and convertible notes, and it burned through $570 million in cash last quarter alone.

While the stock seems cheap based on its potential, the company's finances make it too risky for this investor, at least until there are real signs of silicon carbide growth.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

  • Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $23,657!*
  • Apple: if you invested $1,000 when we doubled down in 2008, you’d have $43,034!*
  • Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $429,567!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of November 4, 2024

Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Wolfspeed. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Big Tech's $800 billion AI bill faces its first real test — free cash flow is the judgeAlphabet and Microsoft report after the close on October 28, Amazon on October 29, with hyperscaler AI capex running near $800 billion a year. Meta's negative free cash flow and 9.40% drop on October 22 was the warning; this week's prints decide whether cloud growth and backlog can pay for the buildout. Here are the consensus numbers, the free-cash-flow table and the two-sided test.
Author  Irene Q.
Oct 26, Mon
Alphabet and Microsoft report after the close on October 28, Amazon on October 29, with hyperscaler AI capex running near $800 billion a year. Meta's negative free cash flow and 9.40% drop on October 22 was the warning; this week's prints decide whether cloud growth and backlog can pay for the buildout. Here are the consensus numbers, the free-cash-flow table and the two-sided test.
placeholder
Anthropic files for a $2 trillion IPO — the $80.7 billion loss is the decoy, the $450 billion compute bill is the riskAnthropic publicly filed its S-1 on October 26, revealing $16.29 billion of first-half revenue (+1,304% year over year) and a $80.7 billion net loss — of which $72.4 billion is a non-cash convertible-note charge. The real number is the $450 billion of signed, mostly non-cancelable compute commitments. Here is what the filing says, why NVDA, ARM and MU are the tradeable read-through, and the conditions that decide whether the AI trade passes its first public valuation test.
Author  Irene Q.
Oct 27, Tue
Anthropic publicly filed its S-1 on October 26, revealing $16.29 billion of first-half revenue (+1,304% year over year) and a $80.7 billion net loss — of which $72.4 billion is a non-cash convertible-note charge. The real number is the $450 billion of signed, mostly non-cancelable compute commitments. Here is what the filing says, why NVDA, ARM and MU are the tradeable read-through, and the conditions that decide whether the AI trade passes its first public valuation test.
placeholder
Fed October Rate Decision Preview: Rate Hike Pause Has Become Consensus, How Will US Stocks, Dollar, and Gold React?The Federal Reserve will announce its October interest rate decision at 14:00 Eastern Time on October 28, and Fed Chair Warsh will hold a press conference at 14:30. Markets currently wide
Author  TradingKey
Oct 27, Tue
The Federal Reserve will announce its October interest rate decision at 14:00 Eastern Time on October 28, and Fed Chair Warsh will hold a press conference at 14:30. Markets currently wide
placeholder
Brent's $115 front month sits $4.6 above January — the $14 spread to WTI is the supply-risk premiumDecember Brent trades at $115.29 while January is $110.71, a $4.58 backwardation. The December Brent-WTI spread is $14.2, versus a $3-5 normal. That gap, not the headline, is where the Middle East supply risk is priced. Here is what the curve says, why the December contract's expiry on October 30 will mechanically cut the headline by $4.6, and the 108.81 neckline that decides the next move.
Author  Irene Q.
Yesterday 06: 21
December Brent trades at $115.29 while January is $110.71, a $4.58 backwardation. The December Brent-WTI spread is $14.2, versus a $3-5 normal. That gap, not the headline, is where the Middle East supply risk is priced. Here is what the curve says, why the December contract's expiry on October 30 will mechanically cut the headline by $4.6, and the 108.81 neckline that decides the next move.
placeholder
Gold Price Analysis Today | Forex Gold Analysis | XAU/USD Analysis - October 29, 2026Get the latest gold price analysis, forex gold insights, and XAU/USD analysis for October 29, 2026. Read on for the details.
Author  Mitrade
5 hours ago
Get the latest gold price analysis, forex gold insights, and XAU/USD analysis for October 29, 2026. Read on for the details.
goTop
quote